This question is not a homework question. I am taking a course in industrial organization, and the textbook/professor have given an illustration of a monopoly that is a contestable market. However, I am having trouble seeing, graphically, how an illustration of a non-contestable monopolistic market would look.
The properties of contestable markets are:
(i) Free entry, (ii) Absolute entry, (iii) No sunk costs with entry.
I have included the image used in both the textbook, and by the professor for contrasting purposes. One other question, if LRAC is decreasing as output increases, would that mean that the monopolist is facing economies of scale, which would cause there to be a barrier for the entrant?
Thank you in advance!